June 5 New York

Pinestone Investments

The DJIA fell by 22.25 points to 21184.04 while the SP500 declined by 2.97 points to 2436.10.   The Nasdaq Composite Index lost by 10.11 points to 6295.68.  The ten year treasury yield was 2.18% and the rate of the U.S. dollar to the yen was ¥109.63.  WTI fell to $47.28 per barrel.  Markets face three major geopolotical risks this week.  Persian Gulf troubles coincide with U.K. vote and Comey testimony.  The decision by a Saudi-led alliance of four countries to cut ties with Qatar is the first in a string of events with the potential to drive big market moves.  The sudden isolation of Qatar helps it join a growing list of political hot spots that includes the Korean Peninsular and Brazil.  Saudi Arabia, Bahrain, the United Arab Emirates and Egypt said they will suspend travel to and from Qatar, escalating tensions triggered by the country’s close ties with Iran.  The four countries’ harsh action against Qatar sent the nation’s equities to the sharpist dip since 2009 and jolted oil markets.  After a temporal surge in early trading, Brent crude fell in minus territories.  Traders speculated it wouldn’t seriously affect energy exports from the Persian Gulf.  Second, British voters are set to vote in a new government on June 8, with Prime Minister Theresa May’s once-overwhelming lead shrinking amid a series of terrorist attacks that has threatened to make terrorism the dominant theme of the campaign’s final days.  A surprise victory for the opposition Labour party would lead to expansionary fiscal policies that could alter the outlook for U.K. yields and pound.  For now, the pound seems to be desensitized to the shocks of terrorist atrocities, though.  Third, Fired FBI Director James Comey is set to testify before the Senate Intelligence Committee on Thursday about his conversations with President Donald Trump regarding allegations of Russian intereference in the 2016 election.  The long-anticipated testimony may drive further moves in U.S. equities and the dollar in a reprise of market swings in May.  Assets tumbled then on the news Comey had written a memo alleging Trump made a request to drop an FBI investigation into former National Security Adviser Michael Flynn.  The dollar dropped to levels not seen since the November election while the DJIA tumbled more than 370 points, Treasuries rallied the most since July and volatility spiked higher.  The SP500 retreated the most since September.  Investors hoping for the return of stock market volatility should be careful when they make their investment judgements, taking these three factors into consideration.

Kazuhide Matsuishi

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